Civil Society Should Ensure Transparency in Taxation

2 April 2011

Maputo — Civil society organisations and the media have a key role to play in increasing transparency in state revenue and expenditure, declared the Norwegian Secretary of State for International Development, Ingrid Fiskaa, in Maputo on Friday.

Opening a seminar on taxation and state building, organised by the Norwegian Embassy and the anti-corruption NGO, the Centre for Public Integrity (CIP), Fiskaa said that a “national tax dialogue” would be an important instrument for obtaining a fair and transparent tax system.

Three weeks ago, in Oslo, Fiskaa formally launched the Norwegian programme of “Taxation for Development”, which is centred on building up the capacity of tax administrations in developing counties. The Norwegian tax administration is cooperating with its Mozambican counterpart, and the equivalent bodies in Tanzania and Zambia.

A two day seminar earlier in the week brought together representatives from the tax authorities of these four countries, as well as from South Africa.

“As citizens and taxpayers”, said Fiskaa to her Friday audience, “you will demand influence on how the government spends resources. As taxpayers, you will be more willing to pay them, if the government provides good quality infrastructures and social services. On the other hand, in many countries, poor government services lead to reluctance to pay taxes”.

Fiskaa stressed the need for international cooperation against illicit capital flight. She estimated that between 1970 and 2004, Mozambique had lost about five billion US dollars in capital flight.

Norwegian tax export Odd-Helge Fjeldstad, of the Christian Michelsen Institute in Oslo, said that illicit outflows of capital from Africa amounted to 11 per cent of the continent’s GDP in 1986, and about eight per cent currently. The outflows of capital are much greater than the inflows of foreign aid.

He stressed that tax evasion and capital flight are facilitated by tax havens and banking secrecy. The existence of tax havens makes it much harder to tax the companies involved, leading to a higher tax burden on those taxpayers who do not resort to such stratagems.

Fjeldstad admitted that tax havens are tolerate and even encouraged by European government, particularly by the British government, since so many tax havens fall under British jurisdiction (such as the Channel Islands, the Isle of Man, The Cayman Islands or the British Virgin Islands).

Nonetheless he was optimistic that the European Union and the United States are now more willing to crack down on tax havens, following the banking scandals that precipitated the international financial crisis which began in 2008.

Fjeldstad warned of the dangers of governments relying on large oil and mineral revenues rather than on general taxation of citizens. This, he said, was frequently associated “with low levels of democracy and states unbound by law”.

As examples, he cited Angola which has “one of the highest inequality ratios in Africa”, and Nigeria “where most citizens do not benefit from the oil revenue, which goes into luxury expenditure and tax havens”.

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